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Opinion: The Yanks are coming

by Scott Bicheno on 12 May 2008, 17:30

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The changing of the guard

As we reported last week, Best Buy’s 50 percent stake in Carphone Warehouse will manifest itself in the form of a major pan-European (including UK) roll-out of ‘large footprint’ (i.e. large) stores next year.

Furthermore, it has emerged that video rental giant Blockbuster is interested in buying struggling PC and consumer electronics retailer Circuit City. Readers won’t need reminding that Blockbuster already has a large presence, or even footprint, in the UK and Europe.

All of this seems to be appalling news for DSGi, which for so long has dominated UK PC retailing though its PC World, Currys and Dixons stores. The emergence of US retailers, with US money and a US obsession with customer service has to be a severe blow to a company that has been on the retreat for a while anyway.

The Internet, which by facilitating price-comparison has encouraged retailers to compete savagely on price, was the first of DSGi’s antagonists in this context. It eventually forced it to say “if you can’t beat them, join them,” and buy French company Fotovista with its it’s etail brand Pixmania and shift the Dixons brand entirely online – rebranding the high-street Dixons Currys.digital.

This appeared to be a move to focus more on the ‘warehouse’ style, out-of-town retail outlets which constitute the vast majority of the PC World and Currys portfolio and through which DSGi is the overwhelming market leader in the UK, with only Kesa-owned Comet and brochure-driven Argos offering resistance.

Dominant force

That was until the UK’s dominant retail force Tesco decided to get serious about tech. The competitive advantage enjoyed by DSGi through economies of scale and buying power was dwarfed by that of Tesco and before long we entered the era of the £300 laptop.

We have always wondered how the hell you make any money out of selling a laptop for £300

We have always wondered how the hell you make any money out of selling a laptop for £300 and the chances are it is used as a loss-leader to create a market for peripherals, software and services.

With a large chunk of the UK going to Tesco on a weekly basis for its grocery shopping, it again is better placed to do this and its consumer electronics sales grew by 31 percent last year.

DSGi’s main hope of convincing people to make the extra journey to get their tech stuff from PC World or Currys instead of Tesco is customer service and in-store experience. This is also critical to its chances of selling more expensive, higher spec PCs, with which there is actually some margin to be had.